Tricksy

Thank you for taking the time to respond Uncle_Kenny, but I'm interested in examining the opportunities for profiting from the correction process itself. Shorting BDEV, BVS, FOXT, SVS, ZPLA, BKG etc is the obvious route in theory but I suspect is challenging to structure and execute efficiently. I'm interested in exploring this, and also in generating some lateral thinking on other ways to capitalise.

The mechanics of house price inflation have been well examined by this forum over the years. Opinions have been expressed as to the magnitude, timing and duration of the inevitable correction. Huge energy has been devoted elsewhere (118, MSE etc) as to how to "play" the inflationary phase, and there are many who have prospered from this. But I can find little discussion as to how savvy individuals can "play" the deflationary phase / correction for financial gain, and I would welcome an examination of the available options. I guess the central question is this: What are the practical ways to short residential house prices in the UK? Here are some starter thoughts for consideration. At this point I will present them without discussion in the hope of starting a robust exchange... 1. Short the equity of house-builders 2. Short the equity of banks with high exposure to UK residential property 3. Short the equity of estate agents 4. Short the equity of any publicly traded funds that have material exposure to UK residential property 5. Own the equity of ancillary services businesses (insolvency practitioners?) that may benefit from the correction process 6. Spread-betting on residential house prices (not sure if this is still offered or not) No apology is offered for the cold and cynical nature of this discussion. A group of cold-hearted individuals have benefitted cynically by exploiting the inflationary phase. Perhaps a different group can benefit in the next phase...? Over to you...

This is an interesting idea. I'm sure it (or some variant) was considered at the time. My immediate observations: NR had about £20bn of retail deposits. Putting up 10% to cover that would have required £2bn. Isn't this about what the bailout cost anyway? NR had a particularly low level of retail deposit funding. Other banks have far greater deposit bases. Possibly a difficult precedent to set. Don't think it would have worked, or could work in other cases.

That's not how they do it. Don't pay too much attention to the one-eyed men of the HPC kingdom! How is the HPI calculated? The HPI is calculated by using Land Registry's own 'Price Paid Dataset'. This is a record of all residential property transactions made in England and Wales since January 1995. At present it contains details on over 16 million sales. Of these, over six million are identifiable matched pairs, providing the basis for the repeat-sales regression analysis used to compile the index. This technique of quality adjustment ensures an 'apples to apples' comparison between properties. The HPI is a repeat sales regression (RSR) index, measuring average price changes in repeat sales on the same properties, ensuring a like for like comparison. This means that price changes on a flat in Mayfair are not compared to those on a flat in the Old Kent Road. The statistical computation of the HPI is performed by Calnea Analytics Limited. Full details of methodology, a discussion of technical questions and a comparison with other index creation methods can be found by visiting www.calnea.com

Why do you say that??

Boomer scum

No, you are not forced to buy government bonds. Where the money is invested depends upon the nature of the particular scheme adopted by your employer, and the investment choices you make for your money within that scheme.

US has tried and failed then?

Nearly all governments everywhere want to prop up house prices?

Perhaps they could cut to the chase and have a referendum on sharing out the accumulated wealth of the (say) top 10% of the population between the less fortunate 90%? I'm shaw it would be a popular proposal.

Why is that?

The better (and more likely) explanation is simply that they are paranoid about security. Problems of the type you're worried about won't show up first in transactions of this type.

Fascinating! Class obsession/envy is still very much the British disease isn't it?

Great work. Insight of the highest order. Well done TMT.

To what end? Your letter says far more about you than it does about the matter in hand. Writing it - and sharing it here - may make you feel good for a few minutes, but it won't help you achieve your goals.

It is also more than a little sensationalist to refer to all UK readers who hope some day to collect pension benefits and then only include data on the funding for government schemes. Total UK pension assets are around £1.5tn - about the same as GDP if you wish to make that specious comparison. I'm not for one minute saying that there isn't a problem with pension provision, but the level of analysis here is a fail...

Yes - guesses on guesses. But these are your guesses not mine! I haven't made any guesses; I've only pointed out where you have made guesses. You don't appear to be aware of the guesses you've made.... As I have set out, in making the statement "...mortgage lenders are losing capital every day at the rate of 5% per annum..." you have made two big guesses: - that 100% of non-performing loans will result in total losses for the lenders (100% default rate on npl's, 0% recovery rate) - that a further 8% of the loans outstanding will become non-performing each year Your last post references some information that you had but disregarded in making your guesses: - You are aware that it is unlikely that all of the non-performing loans will be secured by second charges, or are otherwise vulnerable to 0% recovery rates - You are aware that the annual admittance rate is materially lower than 8% also Given that you had this level of insight I'm at a loss to understand why you went for extreme guesses on key variables. Why didn't you use the knowledge you had to inform your assumptions??

It's not "8% off an asset only earning 4%" though. It's that 8% of the loans are non-performing. These are secured loans where it is extremely unlikely that the value of the collateral will fall to zero. Moving on, your statement is that "...mortgage lenders are losing capital every day at the rate of 5% per annum...". Another implicit assumption here: that a further 8% of loans will become non-performing each year. Whereas in reality the 8% non-performing is an accumulated figure representing the aggregate % of non-performing loans at the point in time that the statement is made. So your statement relies on two monumental implicit assumptions: - that 100% of non-performing loans will result in total losses for the lenders - that a further 8% of the loans outstanding will become non-performing each year Just saying....

The guess implicit in your "...losing capital every day at the rate of 5%..." statement is that all of the non-performing loans will be total losses. 100% provisions against 100% of the non-performing loans.

So you have an implicit assumption of a total loss on the non-performing loans?

That's interesting. Could you explain the logic behind your calculation here please?